Wednesday, June 01, 2005

Background on credit card interchange collective price fixing antitrust litigation


Interchange fees were originally regulated, audited and designed to pay for the cost of transferring money from buyers to sellers. It was designed to balance the cost of transferring money, quickly, efficiently and at a low cost. But, in reality the rates only rise. There is no economic justification for these anti-competitive fees. This is a mature network that is highly inefficient and is a hidden tax that is affecting millions of businesses and consumers. The Interchange rates have increased 85% since 1998. There was no Interchange fee prior to the 1990's and no fee for PIN debit cards; think of the ATM machines - initially there was no transaction fee, just like with writing checks. Electronic transactions inherently should cost less just because it?s automatic and more efficient.

Mitch Goldstone and Carl Berman, founders of "" operate The Credit Card Interchange Blog to provide an informational tool with regular updates. suggests that the friction between banks vs. Merchants / consumers is about to explode; the credit card associations operate in an anti-competitive market power over merchants. Price fixing is illegal and most merchants have little ability to negotiate with Visa and MasterCard for lower interchange fees.

Did you know that the card-issuing banks that control Visa and MasterCard have the ability to to the interchange fees as high as they want and there is no market force that restrains then from doing so? As merchants and consumers begin to understand and learn about these interchange fees, they too will be better informed.